Monday, May 17, 2021

Why stats matter

You want to know what the average household income by ethnicity is. Seems straight forward. You take a survey of about 20,000 households, ask about how much income they receive (from various sources), assign an ethnicity and average it out for all households that fall into each ethnicity. Here is the result:

From the raw data:

European   50,562
Māori 40,760
Pacific peoples 38,204
Asian 44,198
MELAA 43,385
Other ethnic group 43,155

Total 47,775

Um. Don't these averages seem a little on the low side given so many households have two (or more) workers?

They are. That's because of the process called 'equivalisation'. The 'gross' incomes are equivalised according to the number of household occupants. The greater the number of people reliant on the income, the lower the equivalised income will be.

What would be more revealing is the unadjusted or 'gross' household incomes. Unfortunately these do not appear in the published tables. But I can tell you that the average total gross income is $107,196 which is a darn sight higher than the average $47,775 after equivalisation.

Remember the poverty stats are derived from equivalised income - not gross.

So a family with four children may be reported as poorer than the family with two children living next door even though their gross income is higher.

You may say, so what? 

Why they matter is because these stats drive taxation/redistribution policies. They influence how much is taken from Paul to give to Peter. Doesn't matter how hard Paul worked, what sacrifices he made, how careful he was not to have more children than he could personally afford to raise. If he is defined as 'rich' and Peter is 'poor' you know the outcome.

It's interesting that StatsNZ motto is now:

About Aotearoa, for Aotearoa
Data that improves lives today and for generations to come

Depends on whose lives really.

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